SEC Halts Beverly Hills Hedge Fund Fraud

FOR IMMEDIATE RELEASE
2009-96

Washington, D.C., April 29, 2009 — The Securities and Exchange Commission today obtained a court order halting a fraudulent scheme in Beverly Hills, Calif., in which investors were coaxed into investing in two hedge funds that purportedly held more than $800 million in assets when in fact the funds lost money and have less than $1 million in assets.

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The SEC alleges that Bradley L. Ruderman raised at least $38 million from investors through his two hedge funds, Ruderman Capital Partners and Ruderman Capital Partners A. Through fake and misleading account statements, Ruderman assured investors that the hedge funds had earned positive returns as high as 60 percent per year. He falsely claimed that the funds held positions in well-known securities such as Apple, Microsoft Corp., Qualcomm, and Wal-Mart Stores, and he obtained money from at least one investor by claiming that some prominent people were investors in his funds when in fact they were not.

"As alleged in our complaint, Ruderman was willing to say or do anything to persuade investors to entrust their money to him, particularly when his scheme was unraveling," said Rosalind R. Tyson, Director of the SEC's Los Angeles Regional Office. "Ruderman's fabricated account statements presented a rosy picture for investors who were cajoled into believing these hedge funds were well-capitalized and experiencing significant gains rather than major losses."

According to the SEC's complaint, filed in federal court in Los Angeles, neither Ruderman nor his company and hedge funds are registered with the SEC in any capacity.

The SEC alleges that Ruderman made at least one Ponzi-like payment earlier this year when an investor requested a $750,000 withdrawal. Only after receiving two $500,000 deposits from new investors was Ruderman able to transfer funds out of the account to pay the earlier investor.

The SEC's complaint also alleges that Ruderman lied to at least one prospective investor by saying that Lowell Milken (chairman of the Milken Family Foundation and Michael Milken's younger brother) and Larry Ellison (CEO of Oracle Corporation) were investors in the hedge funds. The prospective investor went on to invest in one of the hedge funds under the false impression that Milken and Ellison were invested in them.

The Honorable Valerie Baker Fairbank, U.S. District Judge for the Central District of California, granted the SECís request for emergency relief for investors, including an order temporarily enjoining Ruderman, his company Ruderman Capital Management (RCM), and the hedge funds from future violations of the antifraud provisions and freezing their assets. The Commission seeks preliminary and permanent injunctions, disgorgement, and financial penalties against the defendants.